System and method for optimizing execution of trading orders

ABSTRACT

A system for processing trading orders comprises an optimizer module operable to receive a first trading order and a second trading order. The optimizer module is further operable to receive market data associated with at least one market center. The optimizer module is further operable to determine whether to transmit the second trading order to the at least one market center prior to transmitting the first trading order to the at least one market center, the determination based at least in part on the market data.

TECHNICAL FIELD OF THE INVENTION

The present invention relates generally to electronic trading and morespecifically to a system and method for optimizing execution of tradingorders.

BACKGROUND OF THE INVENTION

In recent years, electronic trading systems have gained widespreadacceptance for the trading of a variety of items, such as goods,services, financial instruments, and commodities. Electronic tradingsystems generally receive and process trading orders from traders.Occasionally, traders submit low quality or unrealistic trading orders.Such trading orders specify criteria that vary widely from prevailingmarket conditions. For example, if the prevailing market price for aparticular trading product is $25.00 per unit, a trading order to buythe particular trading product for $8.00 per unit may be considered anunrealistic trading order. Unrealistic trading orders do not typicallyresult in quickly executed transactions. Instead, unrealistic tradingorders usually remain unfilled for long periods of time. As a result,unrealistic trading orders do not increase liquidity in the marketplace.

Electronic trading systems typically process trading orders receivedfrom traders according to “first-in, first-out” (FIFO) principles. Basedon FIFO principles, electronic trading systems process trading orders inthe order in which they are received from traders. As a result, if arealistic trading order (i.e., a trading order that is likely to resultin a quickly executed transaction) is received shortly after anunrealistic trading order (i.e., a trading order that is unlikely to befilled quickly), the realistic trading order must wait while theelectronic trading system first processes the unrealistic trading order.This delay in processing the realistic trading order may decreaseliquidity in the market place.

SUMMARY OF THE INVENTION

In accordance with the present invention, the disadvantages and problemsassociated with prior electronic trading systems have been substantiallyreduced or eliminated.

A system for processing trading orders comprises an optimizer moduleoperable to receive a first trading order and a second trading order.The optimizer module is further operable to receive market dataassociated with at least one market center. The optimizer module isfurther operable to determine whether to transmit the second tradingorder to the at least one market center prior to transmitting the firsttrading order to the at least one market center, the determination basedat least in part on the market data.

Various embodiments of the present invention may benefit from numerousadvantages. It should be noted that one or more embodiments may benefitfrom some, none, or all of the advantages discussed below. One advantageof the present invention is that the trading system analyzes the qualityof trading orders received from traders based on current market data.Another advantage is that the trading system analyzes the quality oftrading orders based on the trading system's available processing andstorage capacity. The trading system assigns priority to trading ordersthat are most likely to result in quickly executed transactions. In someembodiments, the trading system filters out trading orders that areunlikely to result in timely executed transactions. By assigningpriority to realistic trading orders (i.e., trading orders that arelikely to result in quickly executed transactions), the trading systemreduces the processing time for realistic trading orders. The tradingsystem may thereby increase liquidity in the market place.

Other advantages will be readily apparent to one having ordinary skillin the art from the following figures, descriptions, and claims.

BRIEF DESCRIPTION OF THE DRAWINGS

For a more complete understanding of the present invention and itsadvantages, reference is now made to the following description, taken inconjunction with the accompanying drawings, in which:

FIG. 1 illustrates a trading system according to one embodiment of thepresent invention;

FIG. 2 illustrates a flow of operation among components of a tradingplatform according to one embodiment of the present invention;

FIG. 3 illustrates example quality scores associated with trading ordersaccording to one embodiment of the present invention;

FIG. 4 illustrates a trading system comprising a balancing moduleaccording to one embodiment of the present invention; and

FIG. 5 illustrates a flowchart for processing trading orders accordingto one embodiment of the present invention.

DETAILED DESCRIPTION OF EXAMPLE EMBODIMENTS OF THE INVENTION

FIG. 1 illustrates one embodiment of a trading system 10. Generally,trading system 10 comprises a trading platform 50 communicativelyconnected to clients 20, networks 30, and market centers 40. In order tofacilitate trading, trading system 10 matches trading orders 12 placedby traders 70. Generally, trading platform 50 may determine priorityamong trading orders 12 based at least in part on current marketconditions. By assessing current market conditions, trading platform 50may assign priority to trading orders 12 that are most likely to resultin timely executed transactions. According to certain embodiments,trading platform 50 may thereby increase the liquidity of tradingproducts.

Clients 20 comprise any suitable local or remote end-user devices thatmay be used by traders 70 to access one or more elements of tradingsystem 10, such as trading platform 50. A particular client 20 maycomprise a computer, workstation, telephone, Internet browser,electronic notebook, Personal Digital Assistant (PDA), pager, or anyother suitable device (wireless or otherwise), component, or elementcapable of receiving, processing, storing, and/or communicatinginformation with other components of system 10. Client 20 may alsocomprise any suitable user interface such as a display, microphone,keyboard, or any other appropriate terminal equipment according toparticular configurations and arrangements. It will be understood thatthere may be any number of clients 20 communicatively connected totrading platform 50. In addition, there may be any number of clients 20communicatively connected to market centers 40 without using tradingplatform 50.

Clients 20 are operable to receive trading orders 12 from traders 70 andto send trading orders 12 to trading platform 50 and/or market centers40. Trading orders 12 comprise orders and counterorders. Orders andcounterorders may be “takes” 14, “bids” 15, “hits” 16, and “offers” 17.Orders and counterorders are complementary actions such as, for example,buying and selling. A bid 15 is a request to buy a particular quantityof a particular trading product at a particular price (bid price).Conversely, an offer 17 is a request to sell a particular quantity of aparticular trading product at a particular price (offer price). A take14 is a request to buy a particular quantity of a particular tradingproduct 12 at the best offer price. Conversely, a hit 16 is a request tosell a particular quantity of a particular trading product at the bestbid price. Bids 15 and offers 17 may be considered passive tradingorders 12 because a bid 15 and an offer 17 generally remain in thetrading books until aggressed by a corresponding take 14 or hit 16.Takes 14 and hits 16 are therefore considered aggressive trading orders12. Although system 10 is exemplified below using equities as thetrading product, the trading product that forms the basis of tradingorder 12 may comprise any goods, services, financial instruments,commodities, etc. Examples of financial instruments include, but are notlimited to, stocks, bonds, and futures contracts.

Although clients 20 are described herein as being used by “traders” 70,it should be understood that the term “trader” is meant to broadly applyto any user of trading system 10, whether that user is an individual, amachine, an agent acting on behalf of a principal, a principal, a legalentity (such as a corporation), or any mechanism that is capable ofplacing and/or responding to trading orders 12 in system 10.

Networks 30 are communication platforms operable to exchange data and/orinformation between clients 20 and trading platform 50 and/or marketcenters 40. Network 30 may represent any wireless and/or wirelinenetwork which provides clients 20 with the ability to communicatetrading or transaction information to trading platform 50 and/or marketcenters 40. Network 30 may comprise an Internet architecture.Alternatively, or in addition, network 30 may comprise a plain oldtelephone system (POTS). Transactions may be assisted by a brokerassociated with trading platform 50 or manually keyed into a telephoneor, other suitable electronic device to request that a transaction beexecuted. In certain embodiments, network 30 may be any packet datanetwork (PDN) offering a communications interface or exchange betweenany two nodes in system 10. Network 30 may further comprise anycombination of local area network (LAN), metropolitan area network(MAN), wide area network (WAN), wireless local area network (WLAN),virtual private network (VPN), intranet, cellular network, privatenetwork, or any other suitable number and combination of wireless and/orwireline architectures or systems that facilitates communication betweenclients 20 and other components of system 10.

Market centers 40 comprise all manner of order execution venuesincluding exchanges, Electronic Communication Networks (ECNs),Alternative Trading Systems (ATSs), market makers, or any other suitablemarket participants. Each market center 40 maintains a bid price and anoffer price for a given trading product by standing ready, willing, andable to buy or sell that trading product at publicly quoted prices, alsoreferred to as market center prices. Different market centers 40 mayprovide different market center prices for particular trading products.For example, a particular market center 40 may offer a particular bidprice and/or offer price for a particular trading product, while anothermarket center 40 may offer a different bid price and/or offer price forthe same trading product. A particular market center 40 may charge atransaction cost to execute trading orders 12 that remain in the orderbooks of that market center 40 for more than a certain length of time.

Different market centers 40 may have different policies regarding thedisclosure of various details of trading orders 12. Generally, tradingorder 12 may comprise two parts—a “displayed quantity” and a “reservedquantity.” In placing trading order 12, trader 70 may indicate that onlya portion of the total quantity of trading order 12 should be displayedby trading platform 50 or market center 40 to other traders 70. Thisportion of trading order 12 to be displayed to other traders 70 isreferred to as the “displayed quantity.” The remaining portion oftrading order 12 is referred to as the “reserved quantity.” Designatinga portion of trading order 12 as a “reserved quantity” allows trader 70to enter a large trading order 12 while having trading platform 50 ormarket center 40 only display a portion of that trading order 12 toother traders 70.

Trading platform 50 is a trading architecture that facilitates therouting, matching, and other processing of trading orders 12. Tradingplatform 50 may comprise a management center or a headquartering officefor any person, business, or entity that seeks to route, match, process,or fill trading orders 12. Accordingly, trading platform 50 may includeany suitable combination of hardware, software, personnel, devices,components, elements, or objects that may be utilized or implemented toachieve the operations and functions of an administrative body or asupervising entity that manages or administers a trading environment. Incertain embodiments, trading platform 50 comprises client interface 52,market interface 54, optimizer module 60, and matching module 80.

Client interface 52 of trading platform 50 is communicatively connectedto network 30 and supports communications between clients 20 and thevarious components of trading platform 50. According to certainembodiments, client interface 52 comprises a transaction server thatreceives trading orders 12 communicated by clients 20 via network 30.

Market interface 54 is communicatively connected to market centers 40and supports communications between market centers 40 and the variouscomponents of trading platform 50. Market interface 54 may comprise atransaction server that receives trading orders 12 communicated bymarket centers 40. In addition, market interface 54 may send to marketcenters 40 trading orders 12 received from clients 20 connected directlyto trading platform 50. Market interface 54 may also receive market data130 from market centers 40. Market data 130 may comprise informationregarding market conditions such as, for example, trading volumes, bestbid/offer prices, trends in prices, trends in trading volumes, time ofentry of trading orders 12, number of outstanding trading orders 12,number of active traders 70, or any other information suitable tooptimize the processing of trading orders 12 by trading platform 50.

Client interface 52 and market interface 54 may be communicativelyconnected to optimizer module 60 and/or matching module 80. Optimizermodule 60 represents any hardware, software, firmware, or combinationthereof operable to process, control, and monitor the prioritizing,sequencing, and/or filtering of trading orders 12 submitted by traders70. Optimizer module 60 may comprise a general-purpose personal computer(PC), a workstation, a Unix-based computer, a server computer, or anyother suitable processing device. Generally, optimizer module 60receives trading orders 12 from traders 70 and prioritizes, sequences,and/or filters trading orders 12 based at least in part on market data130, platform data 140, and/or the characteristics of trading orders 12.In particular, optimizer module 60 is capable of prioritizing andfiltering trading orders 12 to optimize liquidity in market centers 40and trading platform 50 and to optimize the efficiency of tradingplatform 50 and/or other trading resources. Optimizer module 60 maycomprise optimizer processor 62 and optimizer memory 64. Although FIG. 1illustrates a single optimizer module 60 in system 10, system 10 can beimplemented using any suitable number and combinations of optimizermodules 60.

Optimizer processor 62 is operable to record trading orders 12 inoptimizer memory 64 and to transmit trading orders 12 to matching module80 and/or market centers 40. Optimizer processor 62 is further operableto execute rules 67 in optimizer logic 66 to prioritize, sequence, andor filter trading orders 12 based at least in part on market data 130,platform data 140, and/or the characteristics of trading orders 12.Optimizer processor 62 may comprise any suitable combination of hardwareand/or software implemented in one or more modules to provide thedescribed function or operation.

Optimizer memory 64 comprises any suitable arrangement of random accessmemory (RAM), read only memory (ROM), magnetic computer disk, CD-ROM, orother magnetic or optical storage media, or any other volatile ornon-volatile memory devices that store one or more files, lists, tables,or other arrangements of information such as trading orders 12. AlthoughFIG. 1 illustrates optimizer memory 64 as internal to optimizer module60, it should be understood that optimizer memory 64 may be internal orexternal to components of trading system 10, depending on particularimplementations. Also, optimizer memory 64 illustrated in FIG. 1 may beseparate from or integral to other memory devices to achieve anysuitable arrangement of memory devices for use in trading system 10.

According to certain embodiments, optimizer memory 64 comprisesoptimizer logic 66. Generally, optimizer logic 66 comprises rules 67 forprioritizing, sequencing, and/or filtering trading orders 12 based atleast in part on market data 130, platform data 140, and/or thecharacteristics of trading orders 12. Rules 67 may comprise algorithms,formulas, functions, tables, or any suitable instructions forprioritizing, sequencing, and/or filtering trading orders 12 to optimizethe execution of trading orders 12. By prioritizing, sequencing, and/orfiltering trading orders 12, trading platform 50 may promote andincrease liquidity in the marketplace and optimize the efficient use ofsystem resources.

Matching module 80 may be communicatively coupled to client interface52, market interface 54, and optimizer module 60. Matching module 80represents any hardware, software, firmware, or combination thereofoperable to process, control, monitor, route, and/or match tradingorders 12 submitted by traders 70. Matching module 80 may comprise ageneral-purpose personal computer (PC), a workstation, a Unix-basedcomputer, a server computer, or any other suitable processing device.Matching module 80 may comprise matching processor 82 and matchingmemory 84. Although FIG. 1 illustrates a single matching module 80 insystem 10, system 10 can be implemented using any suitable number andcombination of matching modules 80.

Matching processor 82 is operable to record trading orders 12 inmatching memory 84 and route trading orders 12 to market centers 40.Matching processor 82 is further operable to execute matching logic 86stored in matching memory 84 to match trading orders 12 received byclient interface 52 and market interface 54. Matching processor 82 maycomprise any suitable combination of hardware and/or softwareimplemented in one or more modules to provide the described function oroperation.

Matching memory 84 comprises any suitable arrangement of random accessmemory (RAM), read only memory (ROM), magnetic computer disk, CD-ROM, orother magnetic or optical storage media, or any other volatile ornon-volatile memory devices that store one or more files, lists, tables,or other arrangements of information such as trading orders 12. AlthoughFIG. 1 illustrates matching memory 84 as internal to trading platform50, it should be understood that matching memory 84 may be internal orexternal to components of trading system 10, depending on particularimplementations. Also, matching memory 84 illustrated in FIG. 1 may beseparate from or integral to other memory devices to achieve anysuitable arrangement of memory devices for use in trading system 10.

It should be understood that the internal structure of trading platform50 and the interfaces, modules, processors, and memory devicesassociated therewith is malleable and can be readily changed, modified,rearranged, or reconfigured to achieve the intended operations oftrading platform 50.

FIG. 2 illustrates a flow of operation among certain components oftrading platform 50 according to certain embodiments of the presentinvention. Optimizer module 60 receives a plurality of trading orders 12from client interface 52. Each trading order 12 received by optimizermodule 60 is associated with certain objective characteristics. Inparticular, each trading order 12 is for a particular quantity of aparticular trading product. In addition, some of the trading orders 12may be associated with a particular price.

In addition to receiving trading orders 12, optimizer module 60 mayreceive market data 130. Market data 130 represents current conditionsin market centers 40. These conditions may comprise current tradingvolumes, best bid/offer prices, trends in prices, trends in tradingvolumes, number of outstanding trading orders 12, number of activetraders 70, time of entry of trading orders 12, and/or any othersuitable number and combination of market conditions.

In addition to receiving trading orders 12 and market data 130,optimizer module 60 may receive platform data 140. Platform data 140represents current conditions in trading platform 50. These conditionsmay comprise current computing capacity of trading platform 50, currentstorage capacity of trading platform 50, time required to processtrading orders 12, electronic transmission speeds, connection speeds,amount of network traffic, number of outstanding trading orders 12,and/or any other suitable number and combination of systemcharacteristics.

Using one or more rules 67 stored in optimizer memory 64, optimizerprocessor 62 is operable to process market data 130, platform data 140,and the objective characteristics associated with trading orders 12 todetermine which trading orders 12 are most likely to result in timelyexecuted transactions. Optimizer processor 62 is thereby operable todetermine which trading orders 12 are most likely to increase liquidityin the marketplace and which trading orders 12 are most likely to resultin efficient use of system resources. Based on these determinations,optimizer module 60 may prioritize, sequence, and/or filter tradingorders 12. In particular, optimizer module 60 may assign priority to atrading order 12 that is likely to result in a timely executed trade. Ifoptimizer module 60 determines that a particular trading order 12 isunlikely to result in a timely executed trade, optimizer module 60 mayfilter or not submit that trading order 12 to matching module 80 and/ormarket centers 40. Alternatively, optimizer module 60 may submit thattrading order 12 to matching module 80 and/or market centers 40 aftersubmitting those trading orders 12 that are more likely to result intimely executed trades.

According to certain embodiments, optimizer module 60 may prioritizeand/or filter trading orders 12 by assigning quality scores 150 totrading orders 12. Using one or more rules 67 stored in optimizer memory64, optimizer module 60 may calculate a quality score 150 for eachtrading order 12 based at least in part on market data 130, platformdata 140, and/or the objective characteristics associated with tradingorders 12. According to certain embodiments, the quality score 150 of aparticular trading order 12 may represent the likelihood that theparticular trading order 12 will result in a timely executed trade. Forexample, a particular rule 67 in optimizer memory 64 may directoptimizer module 60 to assign quality scores 150 on a ten point scalebased on price and size. In this example, optimizer module 60 mayallocate six points to a particular bid if the bid price is equal to thebest bid price in market data 130, five points if the bid price is oneincremental unit less than the best bid price, four points if the bidprice is two incremental units less than the best bid price, and soforth. In this example, the particular rule 67 may also direct optimizermodule 60 to allocate to the particular bid an additional four points ifthe bid is for more than 100 million units, three points if the bid isfor between 100 million units and 50 million units, two points if thebid is for between 50 million and 25 million units, and one point is thebid is for between 25 million and 10 million units. Thus, in thisexample, a bid equal to the best bid price and for more than 100 millionunits will receive a quality score 150 of ten, but a bid that is twoincrements less than the best bid price and for 30 million units willreceive a quality score 150 of six. As illustrated in this example, byusing one or more rules 67 stored in optimizer memory 64, optimizermodule 60 may assign a quality score 150 to a trading order 12 based atleast in part on the objective characteristics of the trading order 12,on market data 130, on platform data 140, and/or on the objectivecharacteristics of other trading orders 12.

In the foregoing example, quality score 150 was determined according toa ten point scale based on price and size of trading order 12. It willbe understood, however, that quality score 150 may be determinedaccording to any suitable scale based on any suitable number andcombination of characteristics associated with market centers 40,trading platform 50, trading orders 12, and/or any other component oftrading system 10.

Because trading platform 50 may continuously receive trading orders 12from traders 70, optimizer module 60 may group trading orders 12 intobatches based on a time interval. Optimizer module 60 may thenprioritize the trading orders 12 in a particular batch relative to eachother. For example, trading platform 50 may receive eight trading orders12 between 12:31:28 p.m. and 12:31:29 p.m. and thirteen trading orders12 between 12:31:29 p.m. and 12:31:30 p.m. In this example, if eachbatch is based on a one second interval, then optimizer module 60 maygroup the eight trading orders 12 into one batch and the thirteentrading orders 12 into another batch. In this example, optimizer module60 may prioritize, sequence, and/or filter the eight trading orders 12of the first batch relative to each other according to market data 130and platform data 140 that is current as of 12:31:29 p.m. Similarly,optimizer module 60 may prioritize, sequence, and/or filter the thirteentrading orders 12 of the second batch relative to each other accordingto market data 130 and platform data 140 that is current as of 12:31:30p.m. Although this example illustrates a batch interval of one second,it should be understood that the batch interval may be any suitablefixed or variable period of time such as, for example, a microsecond ora millisecond.

Using one or more rules 67 in optimizer memory 64, optimizer module 60may determine a quality threshold 160 based at least in part on theobjective characteristics of trading orders 12, market data 130, and/orplatform data 140. According to certain embodiments, the qualitythreshold 160 is a quality level used for determining which tradingorders 12 should be submitted to matching module 80 and/or marketcenters 40 for execution. In some embodiments, optimizer module 60 maysubmit to matching module 80 and/or market centers 40 those tradingorders 12 with quality scores 150 that are above the quality threshold160. Trading orders 12 with quality scores 150 that are above thequality threshold 160 may be referred to as high quality trading orders12 _(H). The trading orders 12 with quality scores 150 that are lowerthan the quality threshold 160 may be referred to as low quality tradingorders 12 _(L). Low quality trading orders 12 _(L) may be stored in aqueue 68 in optimizer memory 64, may be deleted, or may be returned tothe corresponding trader 70. According to certain embodiments, optimizermodule 60 may periodically recalculate the quality threshold 160 basedat least in part on current market data 130, platform data 140, and/orthe characteristics of trading orders 12. For example, in someembodiments, the period for recalculating the quality threshold 160 maycorrespond to the batch interval.

Referring to FIG. 3, an example illustrates certain embodiments of thepresent invention. Trading platform 50 receives trading order 12 a at12:31:28 p.m. One second later, trading platform 50 receives tradingorder 12 b. Trading order 12 a is a bid for 11 million units of productX with a bid price of $11.00 per unit. Trading order 12 b is a bid for125 million units of product X with a bid price of $12.00 per unit. Inthe present example, optimizer module 60 groups trading orders 12 a and12 b into the same batch. According to current market data 130, the bestbid price for product X is $13.00 per unit. Optimizer memory 64comprises a particular rule 67 to assign a quality score 150 to eachtrading order 12. In this example, the particular rule 67 dictates thatoptimizer module 60 allocate six points to trading order 12 if the bidprice is equal to the best bid price in market data 130, five points ifthe bid price of trading order 12 is one incremental unit less than thebest bid price, four points if the bid price of trading order 12 is twoincremental units less than the best bid price, and so forth. Theparticular rule 67 in optimizer memory 64 also dictates that optimizermodule 60 allocate four points if the bid is for more than 100 millionunits, three points if the bid is for between 100 million units and 50million units, two points if the bid is for between 50 million and 25million units, and one point is the bid is for between 25 million and 10million units.

In the present example, based on the particular rule 67, optimizermodule 60 assigns to trading order 12 a a quality score 150 of fivepoints (four points because $11.00 is two incremental units less thanthe best bid price of $13.00 plus one point because the bid is forbetween 25 million and 10 million units). Optimizer module 60 assigns totrading order 12 b a quality score 150 of nine points (five pointsbecause $12.00 is one incremental unit less than the best bid price of$13.00 plus four points because the bid is for more than 100 millionunits). In the present example, optimizer memory 64 comprises a secondrule 67 for calculating a quality threshold 160 based on the objectivecharacteristics of trading orders 12, current market data 130, andcurrent platform data 140. Based on the second rule 67 and the relevantdata, optimizer module 60 calculates a quality threshold 160 of sixpoints. In the present example, because trading order 12 a has a qualityscore 150 of five points, optimizer module 60 places trading order 12 ain queue 68 in optimizer memory 64. Because trading order 12 b has aquality score 150 of nine points, optimizer module 60 submits tradingorder 12 b to matching module 80 for execution. Thus, in the presentexample, even though trading order 12 b was received after trading order12 a, optimizer module 60 first submits trading order 12 b to matchingmodule 80 because trading order 12 b is deemed to be of higher qualitybased at least in part on current market conditions. Although theparticular rule 67 illustrated in this example was based on the priceand size of a trading order 12, it should be understood that there maybe any number of rules 67 in optimizer memory 64 and each rule 67 may bebased on any number and combination of market and/or system factors andmay use any appropriate unit or point system for quantifying and/orcalculating quality scores 150.

The foregoing example illustrates how the present invention may,according to certain embodiments, increase liquidity in a market. Bysubmitting higher quality trading orders 12 ahead of or instead of lowerquality trading orders 12, optimizer module 60 increases the likelihoodthat more trading orders 12 submitted to matching module 80 and/ormarket centers 40 will result in timely executed trades. By increasingtrades, optimizer module 60 may increase liquidity in the marketplace.

According to certain embodiments, a trading order 12 associated with aquality score 150 that is below the quality threshold 160 may be storedin queue 68 in optimizer memory 64. In some embodiments, optimizermodule 60 may periodically recalculate the quality score 150 of atrading order 12 in queue 68. Alternatively, or in addition, optimizermodule 60 may periodically recalculate the quality threshold 160. If therecalculated quality score 150 of a trading order 12 in queue 68 isabove the original and/or recalculated quality threshold 160, optimizermodule 60 may submit the trading order 12 from queue 68 in optimizermemory 64 to matching module 80 and/or market centers 40 for execution.

According to certain embodiments, matching module 80 receives tradingorders 12 from optimizer module 60. Matching module 80 may processtrading orders 12 based on the sequence in which those trading orders 12are received from optimizer module 60. For example, matching module 80may first process the trading order 12 that is first received fromoptimizer module 60, then process the trading order 12 that is nextreceived from optimizer module 60, and so forth. According to otherembodiments, matching module 80 may process trading orders 12 fromoptimizer module 60 based on the sequence in which those trading orders12 were submitted to trading system 10 by traders 70.

In the foregoing example, optimizer module 60 used quality threshold 160to determine which trading orders 12 to submit to matching module 80and/or market centers 40. According to certain embodiments, optimizermodule 60 may not use quality threshold 160. In some embodiments,optimizer module 60 may first prioritize trading orders 12 according totheir respective quality scores 150 and then submit to matching module80 and/or market centers 40 all trading orders 12 in order of decreasingquality scores 150.

Referring to FIG. 4, traders 70 may comprise humans and machines.Trading orders 12 submitted by machine traders 70 _(M) may be referredto as machine trading orders 12 _(M). Trading orders 12 submitted byhuman traders 70 _(P) may be referred to as human trading orders 12_(P). Machine traders 70 _(M) may refer to a robot, an automatedcomputer system, a machine, and/or any other device configured forautomatically submitting trading orders 12 to trading system 10 inresponse to configurable criteria, factors, and/or thresholds. Accordingto certain embodiments, trading platform 50 may increase liquidity inthe marketplace by differentiating between trading orders 12 submittedby human traders 70 _(P) and trading orders 12 submitted by machinetraders 70 _(M). To achieve such differentiation, trading platform 50may comprise a balancing module 90. FIG. 4 illustrates a flow ofoperation involving balancing module 90, according to certainembodiments of the present invention.

Client interface 52 may be operable to determine which trading orders 12were submitted by human traders 70 _(P) and which trading orders 12 wereplaced by machine traders 70 _(M). Client interface 52 may transmit thetrading orders 12 _(P) submitted by human traders 70 _(P) directly tooptimizer processor 62. Client interface 52 may transmit the tradingorders 12 _(M) submitted by machine traders 70 _(M) to balancing module90.

Balancing module 90 represents any hardware, software, firmware, orcombination thereof operable to process, control, and monitor theprioritizing, filtering, and/or sequencing of trading orders 12 _(M)submitted by machine traders 70 _(M). Balancing module 90 may comprise ageneral-purpose personal computer (PC), a workstation, a Unix-basedcomputer, a server computer, or any other suitable processing device.Balancing module 90 may be communicatively coupled to client interface52, market interface 54, and/or optimizer module 60. Balancing module 90may comprise a processor and memory usable to prioritize, sequence,and/or filter trading orders 12 _(M) submitted by machine traders 70_(M). In addition, balancing module 90 may comprise algorithms,functions, tables, or formulas for optimizing the submission of tradingorders 12 _(M) from machine traders 70 _(M) to optimizing module 60.Generally, balancing module 90 receives trading orders 12 _(M) frommachine traders 70 _(M) and prioritizes, filters, and/or sequencestrading orders 12 _(M) based at least in part on market data 130received from market centers 40, on platform data 140, and/or on thecharacteristics of trading orders 12. According to certain embodiments,optimizer module 60 may determine a particular number of trading orders12 _(M) to request from balancing module 90 based on market data 130,platform data 140, and/or the characteristics of trading orders 12.

An example illustrates certain embodiments of the present invention.Client interface 52 receives sixteen trading orders 12—six from humantraders 70 _(P) and ten from machine traders 70 _(M). Client interface52 transmits the six trading orders 12 _(P) from human traders 70 _(P)directly to optimizer module 60. Client interface 52 transmits the tentrading orders 12 _(M) from machine traders 70 _(M) to balancing module90. In the present example, optimizer module 60 comprises a rule 67 torequest from balancing module 90 one trading order 12 _(M) submitted bya machine trader 70 _(M) for every two trading orders 12 _(P) submittedby human traders 70 _(P). Since optimizer module 60 received six tradingorders 12 _(P) submitted by human traders 70 _(P), then optimizer module60 may request from balancing module 90 three trading orders 12 _(M)submitted by machine traders 70 _(M). Balancing module 90 receives therequest from optimizer module 70. Using one or more optimizationalgorithms stored in balancing module 90, balancing module 90 determinesthe three preferred trading orders 12 _(M) submitted by machine traders70 _(M). (The determination of which trading orders 12 are “preferred”may be based on any suitable criteria, method, settings, limits, data,formulas, and/or any suitable number and combination of factors.)Balancing module 90 then transmits the three preferred trading orders 12_(M) submitted by machine traders 70 _(M) to optimizer module 60. Uponreceiving the requested trading orders 12 _(M) from balancing module 90,optimizer module 60 prioritizes, sequences, and/or filters the ninetrading orders 12 (six from human traders 70 _(P) and three from machinetraders 70 _(M)) based at least in part on market data 130 received frommarket centers 40, on platform data 140, and/or on the characteristicsof trading orders 12. Optimizer module 60 then submits one or moretrading orders 12 to matching module 80. Although in the foregoingexample the requested number of trading orders 12 _(M) from machinetraders 70 _(M) was based on the number of trading orders 12 _(P) fromhuman traders 70 _(P), it should be understood that optimizer module 60may use any suitable factors, formulas, or algorithms for determiningthe number of trading orders 12 _(M) to request from balancing module90. In addition, or alternatively, optimizer module 60 may modifyquality score 150 associated with trading order 12 based at least inpart on whether that trading order 12 was submitted by a human trader 70_(P) or a machine trader 70 _(M).

FIG. 5 illustrates a flowchart for processing trading orders 12according to certain embodiments of the present invention. The methodbegins at step 502 where trading platform 50 receives a first tradingorder 12. The first trading order 12 may be associated with a particularprice and a particular trading product. At step 504, trading platform 50receives a second trading order 12. In some embodiments, the secondtrading order 12 may be associated with a particular price and may befor the same trading product as the first trading order 12. At step 506,trading platform 50 receives market data 130 from at least one marketcenter 40.

At step 508, trading platform 50 calculates a first quality score 150associated with the first trading order 12. At step 510, tradingplatform 50 calculates a second quality score 150 associated with thesecond trading order 12. The first and second quality scores 150 may bebased at least in part on the first trading order 12, the second tradingorder 12, market data 130, and/or platform data 140. At step 512,trading platform 50 may determine whether the first quality score 150associated with the first trading order 12 is more favorable than thesecond quality score 150 associated with the second trading order 12. Amore favorable quality score 150 may indicate that the associatedtrading order 12 would be executed faster than another trading order 12associated with a less favorable quality score 150. If at step 512,trading platform 50 determines that the first quality score 150associated with the first trading order 12 is more favorable than thesecond quality score 150 associated with the second trading order 12,then at step 514 trading platform 50 may transmit the first tradingorder 12 to at least one market center 40 for execution. Then at step516, trading platform 50 may transmit the second trading order 12 to atleast one market center 40 for execution. However, if at step 512,trading platform 50 determines that the first quality score 150associated with the first trading order 12 is less favorable than thesecond quality score 150 associated with the second trading order 12,then at step 518 trading platform 50 may transmit the second tradingorder 12 to at least one market center 40 for execution. Then at step520, trading platform 50 may transmit the first trading order 12 to atleast one market center 40 for execution.

In the foregoing example, trading platform 50 compares the first andsecond quality scores 150 against one another. In some embodiments,trading platform 50 may compare quality scores 150 associated withtrading orders 12 against a quality threshold 160. Trading platform 50may generate quality threshold 160 based at least in part on market data130, platform data 140, and/or trading orders 12. If a particulartrading order 12 is associated with a particular quality score 150 thatsatisfies quality threshold 160, then trading platform 50 may transmitthat trading order 12 to one or more market centers 40 for execution.However, if a particular trading order 12 is associated with aparticular quality score 150 that does not satisfy quality threshold160, then trading platform 50 may reject that trading order 12, deletethat trading order 12, return that trading order 12 to the correspondingtrader 70, and/or store that trading order 12 in queue 68 in optimizermemory 64. If trading platform 50 stores that trading order 12 in queue68, then after a configurable time interval, trading platform 50 may,based at least in part on updated market data 130, calculate an updatequality score 150 for that trading order 12. Trading platform 50 maythen compare quality threshold 160 against the updated quality score 150associated with trading order 12 in queue 68. If the updated qualityscore 150 associated with trading order 12 in queue 68 satisfies qualitythreshold 160, then trading platform 50 may transmit that trading order12 to one or more market centers 40 for execution.

Although the present invention has been described in severalembodiments, a myriad of changes and modifications may be suggested toone skilled in the art, and it is intended that the present inventionencompass such changes and modifications as fall within the scope of thepresent appended claims.

1. (canceled)
 2. A method comprising: controlling, by at least oneprocessor: receiving a first trading order, a second trading order andmarket data associated with at least one market center; determiningwhether to transmit the second trading order to the at least one marketcenter prior to transmitting the first trading order to the at least onemarket center, based at least in part on the market data and platformdata representing at least one of computing capacity or storage capacityassociated with a computer trading system; analyzing quality of tradingorders received from traders based on current market data and platformdata that includes available processing and storage capacity of thecomputer trading system; and filtering out trading orders that areunlikely to result in timely executed transactions, thereby reducingprocessing time for realistic trading orders and increasing liquidity ina marketplace.
 3. The method of claim 2, further comprising:controlling, by the at least one processor, assigning priority totrading orders that are most likely to result in quickly executedtransactions.
 4. The method of claim 2, wherein the determiningcomprises: calculating a first quality score associated with the firsttrading order, the first quality score based at least in part on themarket data and on the first trading order; calculating a second qualityscore associated with the second trading order, the second quality scorebased at least in part on the market data and on the second tradingorder; and comparing the first quality score associated with the firsttrading order against the second quality score associated with thesecond trading order.
 5. The method of claim 4, wherein the firsttrading order is associated with a first price, the market datacomprises a second price, and the first quality score is based at leastin part on the first price and the second price.
 6. The method of claim4, wherein the first trading order is associated with a quantity of atrading product, and the first quality score is based at least in parton the quantity of the trading product.
 7. The method of claim 4,wherein the first quality score is based at least in part on whether thefirst trading order is associated with a machine trader.
 8. The methodof claim 2, further comprising controlling, by the at least oneprocessor: transmitting at least one trading order to a queue; receivingupdated market data after a configurable interval of time; calculatingan updated quality score associated with the at least one trading orderin the queue, the updated quality score based at least in part on theupdated market data and the at least one trading order; and determiningwhether to transmit the at least one trading order to the at least onemarket center, based at least in part on the updated quality score. 9.The method of claim 2, wherein the determining comprises: calculating afirst quality score associated with the first trading order, the firstquality score based at least in part on the market data and on the firsttrading order; calculating a second quality score associated with thesecond trading order, the second quality score based at least in part onthe market data and on the second trading order; determining a qualitythreshold based at least in part on the market data; and comparing thefirst quality score associated with the first trading order and thesecond quality score associated with the second trading order againstthe quality threshold.
 10. The method of claim 9, wherein the firsttrading order is associated with a first price, the market datacomprises a second price, and the first quality score is based at leastin part on the first price and the second price.
 11. The method of claim9, wherein the first trading order is associated with a quantity of atrading product, and the first quality score is based at least in parton the quantity of the trading product.
 12. The method of claim 9,wherein the first quality score is based at least in part on whether thefirst trading order is associated with a machine trader.
 13. The methodof claim 9, further comprising controlling, by the at least oneprocessor: rejecting or deleting the first or second trading order whenthe first or second trading order is associated with a quality scorethat does not satisfy the quality threshold.
 14. The method of claim 9,further comprising controlling, by the at least one processor:transmitting the first or second trading order to a queue when the firstor second trading order is associated with a quality score that does notsatisfy the quality threshold.
 15. The method of claim 14, furthercomprising controlling, by the at least one processor: receiving updatedmarket data after a configurable interval of time; calculating anupdated quality score associated with the first or second trading orderin the queue, the updated quality score based at least in part on theupdated market data and the first or second trading order; comparing theupdated quality score associated with the first or second trading orderagainst the quality threshold; and when the updated quality scoreassociated with the first or second trading order satisfies the qualitythreshold, transmitting the first or second trading order to the atleast one market center.
 16. A system comprising: at least one processorconfigured to control: receiving a first trading order, a second tradingorder and market data associated with at least one market center;determining whether to transmit the second trading order to the at leastone market center prior to transmitting the first trading order to theat least one market center, based at least in part on the market dataand on platform data representing at least one of computing capacity orstorage capacity associated with a computer trading system; analyzingquality of trading orders received from traders based on current marketdata and platform data that includes available processing and storagecapacity of the computer trading system; and filtering out tradingorders that are unlikely to result in timely executed transactions,thereby reducing processing time for realistic trading orders andincreasing liquidity in a marketplace.
 17. The system of claim 16,wherein the at least one processor is configured to control thedetermining by: calculating a first quality score associated with thefirst trading order, the first quality score based at least in part onthe market data and on the first trading order; calculating a secondquality score associated with the second trading order, the secondquality score based at least in part on the market data and on thesecond trading order; and comparing the first quality score associatedwith the first trading order against the second quality score associatedwith the second trading order.
 18. The system of claim 17, wherein thefirst trading order is associated with a first price, the market datacomprises a second price, and the first quality score is based at leastin part on the first price and the second price.
 19. The system of claim17, wherein the first trading order is associated with a quantity of atrading product, and the first quality score is based at least in parton the quantity of the trading product.
 20. The system of claim 17,wherein the first quality score is based at least in part on whether thefirst trading order is associated with a machine trader.
 21. Anon-transitory storage medium configured to store instructions which,when executed by at least one processor, control: receiving a firsttrading order, a second trading order and market data associated with atleast one market center; determining whether to transmit the secondtrading order to the at least one market center prior to transmittingthe first trading order to the at least one market center, based atleast in part on the market data and on platform data representing atleast one of computing capacity or storage capacity associated with acomputer trading system; analyzing quality of trading orders receivedfrom traders based on current market data and platform data thatincludes available processing and storage capacity of the computertrading system; and filtering out trading orders that are unlikely toresult in timely executed transactions, thereby reducing processing timefor realistic trading orders and increasing liquidity in a marketplace.